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There’s Always a Catch: The Truth About Zero Interest Loans

There’s Always a Catch: The Truth About Zero Interest Loans

When you’re in dire need of cash, the first thing that might come to mind is opting for a loan. As many are aware, a loan is when you borrow money from a lender that must be paid back after a specified period of time. Most of the time, lenders charge interest on top of the money you’re lending, so they benefit from you borrowing their money.

Interest rates on loans can vary from a measly 5% to a whopping 36%. Interest rates can be higher or lower depending on who the lender is, how much money you will be borrowing from them and for how long, the type of loan you’re opting for, and what your credit score is.

As expected, interest rates can certainly rack up your debt if you opt for the wrong loan or have a poor credit score at the time you apply for the loan. So, when you come across a “zero interest loan,” you’re of course going to be thrilled. But chances are, you’re also going to be skeptical. What’s the catch? Is there secret interest charged?

Getting your questions answered about applying for and taking out a loan is important considering your money and credit score are at risk. Here’s the honest truth about zero interest loans:

1. Very few people qualify.

Lenders usually give the highest interest rates to those with the poorest credit scores. The reason for this makes perfect sense. If someone has poor credit, this is an indicator that they are not very responsible with money. Thus, why would a lender want to put their trust into someone like this, not knowing if they would recover all of their money?

On the other hand, because those with good credit are often better with their finances and have been known to pay their debts back on time, lenders are going to favor these individuals the most. Thus, they will be the first to be approved for a loan over their poor credit counterparts and will benefit from a low (or even inexistent) interest rate.

Fortunately, you can always improve your credit score, but this will take time, effort, and lifestyle changes in order to do so. If you don’t have the time to boost your credit before applying for a zero interest loan, there are fortunately lenders out there willing to let you borrow money, even if you have bad credit to date.

2. Deadlines are usually rigid.

If you prefer deadlines to be flexible and negotiable, know that you aren’t going to get it with a zero interest loan. For lenders, letting people borrow their money without paying interest is already risky enough, and for you, is quite a privilege, so in their mind, extending deadlines isn’t financially feasible for them.

Therefore, it’s a wise idea to only opt for a zero interest loan if you have a stable income and are completely sure you will be able to meet the initial repayment deadline the lender has set in stone. So, if you feel hesitant about a zero interest loan, listen to your gut, and find a loan that has a more versatile and lenient deadline.

If you require a deadline extension, keep in mind that your lender has the legal right to charge you heavy penalties or even start charging backdated interest for the loan. For some folks, they would be better off paying interest on a traditional loan rather than dealing with the consequences of not paying their zero interest loan back on time.

With the latter said, if you aren’t positive you’ll be able to stick to your word when it comes to paying back your loan by its specified date, your best bet is to avoid zero interest loans at all costs. It’s all of nothing with zero interest loan lenders because after all, they’re businessmen, not your best friend.

3. Salespeople like to take advantage of those who qualify for zero interest loans.

Salespeople and dealers love to use the terms “zero interest loan,” “no interest,” or “interest-free” to lure people in, because for one, nobody likes paying interest. If everyone could afford to pay large expenses out of pocket to avoid paying a lender interest, they would, and with a zero interest loan, they still can. That’s the benefit!

Another reason salespeople like to take advantage of those who qualify for a zero interest loan is because these folks are more likely to opt for larger loan amounts. Why? Because the more money they borrow, the heavier the interest they’ll have to pay. But with zero interest loans, there’s no interest at all, so why not borrow more?

So, keep in mind that if you qualify for a zero interest loan, you may end up opting for a larger loan amount than you might intend. This could certainly be a bad thing if you bite off more than you can chew, or in this case, more than you can afford to pay back.

Likewise, be aware that if you go to a dealership, the salesman or saleswoman is more likely to encourage you to spend more on a vehicle and may even be less likely to come down on the price of a vehicle you’re negotiating if you have a zero interest loan, all to get a larger commission out of you.

4. If you don’t pay back your loan on time, there are heavy penalties and fees.

You already know that zero interest loans have rigid deadlines, but let’s talk more about the penalties and fees lenders can charge if you fail to pay back your loan on time. The heavy penalties and fees lenders charge borrowers play a significant role in allowing them to stay in business as lenders and be able to provide others loans too.

While you may think you can sweet talk your lender into letting you extend your deadline just a little longer, it’s not going to work as there was an initial agreement set up that you would not have to pay interest at all if any only if you are able to pay the loan in full by a certain date.

Just one late payment to your lender can result in a hefty consequence, and your lender will be quick to turn your zero interest loan into one that charges interest, which defeats the purpose of a zero interest loan. Penalties and fees for failure to pay these loans back on time also apply to zero interest installment debts, credit cards, and car loans.

5. Zero interest loans are not for everybody.

Of course, the idea of a zero interest loan is exciting upon first learning about them. Many believe that getting charged zero interest on a loan is too good to be true. While it is true that zero interest loans have no interest, it’s the details and fine print of these loans that draw some people away.

Based on the latter truths we discussed about zero interest loans, it’s clear that not everyone is going to be approved for a zero interest loan. Also based on the latter, know that many may not be fond of such loans from the start once they learn what these types of loans truly entail.

Zero interest loans are best for individuals with ideal credit, who are financially responsible, and who are confident they can pay back the borrowed money by its due date. Even if you qualify for a zero interest loan yet don’t have the best credit, opting for such a loan might not be the best idea when it comes to being able to pay it back.

If you don’t qualify for a zero interest loan, aren’t sure if you can afford to pay back your loan back on a strict timeline, or fear the risks that come with such a loan, opting for a regular loan with interest might be more convenient. Either way, there’s a loan out there for everybody. With a little research, you can find the loan that’s perfect for you.

Check out OppLoans requirements to see if you qualify for a loan today.


Whether you require money for your next business venture or for the purchase of a new vehicle, there are many different payment options out there for you to turn to. One of the most common types of payment options for the latter scenarios are loans. However, a drawback to getting a loan is that you’ll likely have to pay interest to your lender.

For those who don’t want to pay their lender more than they borrow from them, zero interest loans are one type of loan to consider. However, it’s important to consider the fact that these loans are harder to get, have rigid deadlines, and have penalties and fees if you fail to pay them back on time.

Also know that salespeople like to take advantage of folks who qualify for zero interest loans and that a zero interest loan might not even be the best financial option for you to begin with. Regardless of what financial option you think is right, always conduct solid research prior to opting for any type of loan, so there aren’t any surprises.

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